What is Bank Rate, Repo Rate , Reverse Repo Rate , CRR & SLR ?

Policy Rates:

  • Bank Rate: The interest rate that central bank charge from the other scheduled commercial banks on the loan given to them is called as Bank Rate.
  • Repo Rate: Repo rate is the rate at which central bank of a country lends money to commercial banks. Bank lends from the central bank in the event of any shortfall of funds. This rate is used by the central bank to control the inflation rate of the country.
  • Reverse Repo Rate: Itis the rate at which the┬áReserve of India (Central Bank)borrows money from commercial banks. If there is an increase in the reverse repo rate then banks tries to keep more funds with the Central Bank to earn a good return on their idle money. It is also used as a tool by the RBI to pump out excessive money out of the banking system.

Reserve Ratios:

  • Cash Reserve Ratio (CRR): The total cash that the banks have to park in their specified current account maintained with the Reserve Bank of India (RBI) is called as Cash Reserve Ratio (CRR). This method is used by the RBI to pump out the excessive money from the banking system.
  • Statutory Liquidity Ratio (SLR): Statutory Liquidity Ratio (SLR) is in the form of cash (book value), gold (current market value) and balances in unencumbered approved securities kept by bank with the Central Bank.

You Can Check the current policy Rates and Reserve Ratios @ http://www.rbi.org.in/home.aspx